Rich Fiscus
3 Jun 2008 16:17
After Netflix held their annual investor conference last week analysts began criticizing C.E.O. Reed Hastings' vision for the company's future. The criticism primarily centered around plans to spend as much as $70 million dollars this year to improve and market their streaming video service.
"I think the way to measure us is the number of millions of Netflix-ready devices installed in homes," Hastings told investors. "If that's a big number at the end of '09, then our strategic investment has greatly paid off. If it's a small number, you have every right to be whiny about management having wasted a lot of money."
He asked investors to be patient and allow the company to develop their new business model to replace their currently booming DVD rental operation within the next few years. A few days earlier, when meeting with analysts, Netflix CFO Barry McCarthy said of the strategy "if we fall on our face I have no doubt investors will vote us off the island."
At least one of analyst, Michael Pachter of Wedbush Morgan Securities, wasn't convinced. Pachter called the Netflix plan "crazy" and "not worth it." He added, "The math only makes sense as the number of users increases dramatically."
Netflix may not have dramatically increased the number of people using their Watch Instantly service yet but Hastings' prediction about the appeal of the set-top boxs, may prove to be dead on. In fact it looks like the boxes are selling faster than the company behind them, Roku, can supply them.
"Due to the tremendous coverage and initial success of this product we're now in a two-week back order situation," said Tim Twerdahl, Roku's Vce President of Consumer Products. "We have boats coming in weekly from China with additional products and we're doing everything we can to get them out."